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Debunking the Myths: Residency

But choosing to relocate to Spain can mean new complications for Brits. Knowing the difference between domicile and residence is important for tax purposes, making an assumption could lead to incorrect tax declarations which can lead to penalties and heavy tax bills.

Even if you don’t need a visa to stay in Spain, you will need an NIE No. (similar to a National Insurance No.) and if planning to stay permanently then you should apply for Residencia. These items make you a legal resident in Spain and are necessary for employment and other matters.

Permanent residents will first need to register on the “Padrón” at the local Town Hall before applying for their residencia status.  This is like the Electoral Roll in the UK and allows you to vote in local and EU elections.  Until recently padróns were relatively easy to obtain as central government funds are allocated based on the numbers registered to each municipality.  The rules have been tightened up since Brexit and qualifying criteria can vary between different Town Halls.

Once you have your padrón you can apply for your residencia.  A person who applies for full residency can enjoy many benefits.  For example, if you purchase then sell your home in Spain you may be liable for capital gains tax if you have not applied for residency.  You will also be able to apply for a Spanish driving licence, Pensioner’s card and a SIP card giving you access to the State Health system.

However, the main test for tax residency is the 183-day rule.  This means that if you are present in Spain for more than 183 days in the Spanish tax year (lasting from January to December) you will be deemed to be tax resident.  A tax resident is liable for income tax on their worldwide income and would also be liable for other taxes including Spanish Succession (Inheritance)Tax.  The total number of  days does not have to be consecutive.  This rule applies whether or not you have applied for or have received your residencia.  As it is possible to be liable for tax in both countries there is a Dual Tax Treaty with Spain which your tax adviser would utilise to ensure you do not pay the same tax twice, although you may be liable for any difference.

Domicile is a separate legal term in the UK and strangely is not determined by where you live. A domicile is the country in which a person officially has as their natural home, or a substantial connection with, and could eventually return to if residing abroad. When born, you’re automatically assigned to the same domicile as your father if your parents are married and this is defined as your domicile of origin.  Domicile has a huge bearing on Inheritance Tax in the UK as UK domiciles are liable for UK Inheritance Tax on their worldwide assets.

Of course, there are many questions and worries circulating about Brexit, and what it would mean for tax-paying expats. The term EU citizenship is used frequently.  Citizenship is effectively the same as nationality and is generally where you were born or hold a Passport.  Whilst Britain remains in the EU, British Nationals are afforded EU citizenship which confers the same rights as any national in any of the EU member states.

As of writing, it is unclear what impact the Brexit negotiations will have on the rights of British expats both here in Spain and the rest of the EU.

Perhaps the best advice for British expats who intend to stay in Spain would be to ensure you have got your padrón and residencia in place which will surely strengthen your position as to your rights as a Spanish resident regardless of Brexit.

Other News

Expats want clear plan

Houses of ParliamentBritish expats who are uncertain what they should do regarding their regular savings plans are hopefully reassured by Theresa May’s announcement that she wishes to secure the status of expats in the European Union at an early stage during the Brexit negotiations.

However, the Prime Minister has refused to divulge further details of the Government’s strategy for negotiating the UK’s formal exit from the EU, leaving expats without any further clarity regarding their future options – for example in respect of education fee planning and international pension planning – in relation to their expat regular savings.

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CSG Changes for Expats in France

Couple holding handsThe wealth management plans of many expats in France have received a welcome boost with an announcement by the French government that there will be a reduction in the rate of social charges on investment income, meaning that low income expats will now be subject to a 7.5% charge compared to the previous 17.2% rate. However, the basic rates will remain as they were in 2018.

The news, which was announced as part of the social security budget for 2019, is of particular interest to expats in retirement as well as those who draw investment income. It also benefits those who do not live in France but receive income from investments in the country.

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